1 Dividend Juggernaut That Could Grow Fast in a Recession

Restaurant Brands International (TSX:QSR)(NYSE:QSR) stock looks way too cheap to ignore, even going into an economic downturn.

| More on:
Growth from coins

Image source: Getty Images

It’s been a pretty choppy start to August, with investors rattled by the U.S. jobs numbers, which were much better than expected, with a jaw-dropping 528,000 positions added in July alone.

With such strength in the job market, the Fed and Bank of Canada (BoC) may have a harder job fighting off elevated inflation without picking up their rate-hike pace. With job growth surging and further upward pressure on wages (this would make it harder to combat inflation), the Fed and BoC may have the means to pull out a few more upside surprises come the next meeting.

Whether or not the Fed and Bank of Canada need to inflict more economic pain remains to be seen. Regardless, I believe the biggest risk to markets today is not being aggressive enough with rates. Like it or not, the markets could continue to be a choppy ride going into year’s end, as investors hope for a soft landing.

At this juncture, Restaurant Brands International (TSX:QSR)(NYSE:QSR) is a terrific pick to ride out a rate-induced storm.

Restaurant Brands International

Restaurant Brands is an underperforming basket of fast-food icons that can’t seem to bring out the most in its chains. Though the firm has struggled in the wildly competitive market of quick-serve restaurants, I think management is on the verge of turning a corner going into an environment that could be a boon for sales growth.

When inflation is high and there are fears that stagnant growth is on the horizon, the low-cost, fast-food firms with solid value options will shine brightest. These days, the consumer is holding up strong, but sentiment could wane quickly in the latter half of the year, as more rate hikes further stress consumer balance sheets.

Indeed, many consumers are sitting on considerable savings. However, inflation has taken a big bite out of such nest eggs. With stagnant wage growth and modest job losses a possibility, I’d be unsurprised if consumers began ditching pricy restaurants for cheap and tasty offerings at the local Burger King or Tim Hortons.

At the end of the day, fast food is a recession-resilient product that economists refer to as “inferior” goods. When times get harder, demand tends to go up. Whether or not the rate-induced slowdown results in a recession, it’s clear that QSR is better geared than most other firms to make the most of the situation.

Menu innovation could be essential to recession-era growth

Following the release of some solid quarterly results, CEO Jose Cil remarked on menu innovation as a means to drive sales growth.

“Our culinary team is now looking to continue to innovate and drive guests in with new ideas,” said Cil in an interview conducted by Yahoo Finance.

Though QSR is open to testing the waters with intriguing new menu items, Cil noted that it will continue to “deliver core products that people love.” Undoubtedly, Tim Hortons is a brand where customers continue to crave the basics.

Turnaround brewing at Tims

For the latest quarter, Tim Hortons saw an impressive 12.2% in same-store sales growth (SSSG), beating estimates calling for 8%. In the Canadian market, Tim Hortons saw SSSG of 14.2% — incredible numbers driven by product innovation.

Indeed, the new “Loaded Bowls” menu item has hit the spot with some Canadians, while its collaboration with Justin Bieber is starting to show signs of paying off. As Cil and company continue to innovate, I expect nothing but great things going into a period of economic sluggishness.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has positions in Restaurant Brands International Inc. The Motley Fool recommends Restaurant Brands International Inc.

More on Dividend Stocks

grow dividends
Dividend Stocks

1 Cheap Stock to Turn a $20,000 TFSA Into $267,000

If you're looking to boost your TFSA, you need a cheap stock that you can hold for decades. And I…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

2 of the Best Monthly Passive-Income Stocks to Buy in Canada Right Now

Here are two of the best Canadian monthly passive income stocks you can consider buying right now to hold for…

Read more »

stock analysis
Dividend Stocks

3 TSX Stocks I Will “Never” Sell

Few companies offer a powerful enough combination of dividends and growth potential to deserve a permanent place in your portfolio.

Read more »

value for money
Dividend Stocks

2 Cheap TSX Stocks for TFSA and RRSP Investors to Buy Now

These stocks look attractive today to buy for a TFSA or RRSP portfolio.

Read more »

Increasing yield
Dividend Stocks

3 TSX Stocks With High Dividend Yields

These three high-yielding dividend stocks would be excellent additions to your portfolio in this volatile environment.

Read more »

Payday ringed on a calendar
Dividend Stocks

New Investors: 3 Top TSX Dividend Stocks That Pay Cash Monthly

Canadian investors looking for monthly dividends have plenty of options on the TSX. Here's three of my favourite stocks for…

Read more »

woman data analyze
Dividend Stocks

These U.S. Stocks Are No-Brainer Additions to Your Portfolio

Buy these two no-brainer U.S. stocks if you want to gain exposure to international stocks in your self-directed portfolio.

Read more »

Value for money
Dividend Stocks

1 Value Stock Every Canadian Investor Should Own

This value stock not only has a solid present, but a stable future at incredibly cheap and even oversold prices!

Read more »